He's a pro-western ally, the model for this is obviously Salazar's Portugal and Franco's Spain. After some initial distaste about working with Fascists NATO will get over it and admit Italy as a member.
Italian fascism increasingly becomes dysfunctional and it gets caught up in colonial wars in Libya and Ethiopia. Libya becomes something like the Italian Algeria and Ethiopia becomes its Angola. I don't see Italy winning in any of those places because the fundamental balance of power between the colonizers and the colonized is tiled too much towards the latter. Italy's economy will be weak under Fascism and at least in Ethiopia Communists would be sending lots of weapons in. Eventually Italy loses the war in both places and the regime loses credibility. By the 1970s at the latest Mussolini will die for sure and his death is likely to trigger a liberal revolution, the monarch will probably support it and Italy democratizes like Spain.
Lybia? Forget it, due to sheer italian (and arab) numbers an Algeria like scenario is not possible, expecially if Italy remain neutral and the massive colonization program continue; the arab will soon become a minority in many cities.
The current generation of local arab are too cowed by Graziani job to even think about rebel, the real troubles will start in the 60's but by that moment we will have more a North Ireland scenario than an Algeria-one.
Ethiopia? That's much more probable, but with the added problem that Eritrean and Somalian will not support their rebellion, probably the contrary.
Hell the entire decolonization process will be different with an Italy neutral, as this mean an United Kingdom that's much less spent than OTL (no East African and North African campaign, less panic for a possible invasion by the Germans so Dakar and Mars el Kebir can be butterflyed away...smoothing relations with Free France and get them some more colonies), totally different pacific campaign as there will be no need to divert asset in the Meditterean and speaking of that sea, now it's open greatly simplify the logistic situation
Basically we will have a totally different WW2 and so a radically different post-war.
Mussolini will try to get the most from the allies to keep his neutrality but what can directly obtain it's limited (implementation of the Franco-Italian agreement of 35, cultural right in Malta, some share of Suez or at least favorable price for his use, basin rights and on Djibouti, maybe even some demilitarizated zone on Algeria and Tunisia and the discard of the 1918 french law regarding the italian community in Tunisia ).
Indirectely he will try to get a free hand on Yugoslavia, this can complicate Italian-German relations as Berlin will not like someone that rock the boat of the Balkans before Barbarossa...still the situation in Yugoslavia it's so complicated that frankly anything can happen.
The moment Rome see the writing on the wall for Germany will join the allies, expecially to get back Austria as a puppet and to block any advance on the region by the URSS
After the war, Italy with Spain, Portugal (and maybe Greece if not involved in the war) can form her mini-block of fascist nations that will proudly declare their independence from both block but in reality will be clearly western aligned.
Benny will never see the 60's, too stress, too damaged health...too excess
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Following the great tradition of the italian leader...i doubt that he will have a designated heir (sure there will be a series of supposed heir but they will not last long as they will quickly become a possible competion) and this mean that the moment he die, the entire castle go down, quietly (more or less) but will go down, with at least some democratic reform to quiet the internal opposition and please the foreign (western) allies.